Decision Making

Theory
 Lecturers

Dr.Cand Romi Setiawan, SE, MSM, CBOA, CPMP Daniella Cynthia Sampepajung, SE, MSc
Learning Contract
 Course Objectives
• To explain scope of Decision Making
Process and its application in
operational decision making
• To explain Basic Concept of
Probability and its role in solving
problems
• To understand and apply Probability
Distribution in operational decision
making
• To understand and apply Decision
Analysis: with / without Probability in
operational decision making
• To describe and apply Markov Analysis in
solving operational problems in the
organization
• To describe and apply Games Theory in
solving operational problems in the
organization
• To explain concept and functions of
Simulation Model in decision making
• To apply Dynamic Programming in
operational decision making
• To describe and apply Analytical
Hierarchy Process (AHP) in solving
operational and strategic problems
within organization
References

Primary
Anderson et al., (2019) Introduction to Management Science: Quantitative Approach
to Decision Making, 15th Ed, Cengage Learning, Inc

Secondary
• Taylor III. (2019). Introduction to management science, Pearson Education Limited
• Kahneman, (2011) Thinking, Fast and Slow, Farrar, Straus and Giroux
• Mukherjee, (2022) Decision Making: Concepts, Methods, and Techniques
• Relevant literatures
Introduction
A choice or judgment that you make after
thinking and talking about what is the
best thing to do Strategic
(Oxford Advance Dictionary, 2022)
Decision
Activity
Maker

Decision Operational

Decision
Impact
Entity
Tactical
Decision Making
Situation-
Specific

Alternate Decision System

Choice Thinking
Making

Action-
precedent
 Situation-
Specific

Alternate Decision System

Choice Thinking
Making

Action-
precedent
 Situation-
Specific

Alternate Decision System

Choice Thinking
Making

Action-
precedent

Question:
How to maximize the profit by optimize this limited
resources
 System Thinking

System 1
• System 1 operates automatically and quickly, with little or
no effort and no sense of voluntary control

System 2
• System 2 allocates attention to the effortful mental
activities that demand it, including complex computations
. Stanovich & West, 2000
 Decision Making Process

Decision
Decision Making

Defining Identify Determine Evaluate the Choose an Implement Evaluate the

problem alternatives the criteria alternatives alternative the decision result

Problem Solving
 Start

Alternative 1 Perut keroncongan Problem

Decision 1 Pesan makan Ya Lapar? Identify Problem

Tidak Alternative 2
Mie Ayam Tidak Nasi?

Ya

Nasi Goreng Tidak Berkuah?

Ya

Decision 2 Nasi Soto Decision 3

End
Analizing The Alternatives

Judgement
Qualitative
Analysis
Experience

Evaluate the
Make a decision
alternatives

Linear Program
Quantitative
Analysis
Non Linear
Program
Conclusion

• Decision is a choice or judgment that you make after thinking and

talking about what is the best thing to do
• Decision elements are decision maker, activity, entities, and impact on a
decision made
• Decision making elements are situation-specific, system thinking,
action-precedent, and alternative choice
• Decision making process start from structuring the problem, analyzing
the alternatives until choosing an alternative.
• The alternatives can be analyzed by using qualitative and/or quantitative
analysis.
Thank You
Case Discussion

• Read the journal:

https://www.researchgate.net/profile/Dessy_Aliandrina/publication/24
115837_Human_Errors_in_Decision_Making/links/00b49528584b90ef
c4000000.pdf

• Discuss with your group:

• List the human error from the article
• how human error affect the result of the cases
• From your group perspective, what the considerations for the decision maker
to avoid the error.
• Present the result of your group conclusions in the class
Next Meeting

Linear Programming
Read:
• Anderson et al., (2019), chapter 2 & 4
• Taylor III. (2019), Chapter 2
• Other References